Customer loyalty programs were introduced by airlines, hotels, and rental car companies to retain their existing customers as well as to attract new customers. In many of these programs, a customer earns loyalty units (generally regarded as Points, Miles, etc) for undertaking some activity (E.g. taking flights on host airline or a partner airline or a card partner). The loyalty units, which are earned in these programs, can be redeemed for various goods and services offered as awards. The principle of a loyalty program is to retain an existing customer base, as it is more expensive to bring in new customers than to retain existing ones.
The objective of these loyalty programs is to encourage customers to do more business with the loyalty program partners. The products and services offered by airlines, car rental companies, hotels, and the like, are all pretty much of generic nature. Accrual of loyalty units and the redemption of these loyalty units for rewards therefore form a significant differentiator.
Loyalty programs allow members to accrue in various types of loyalty units such as ‘Frequent Flyer points’, ‘miles’, status credits, etc. Financial accounting practices require that loyalty programs correctly calculate and represent liabilities for the member accruals.
Loyalty programs charge their partners for the member accruals to cover such liabilities. The partners pay the loyalty programs as they benefit by way of increased business from the members. Calculating receivables from the partners in monetary currency is conventionally based on a complex criteria involving (1) what was earned, e.g., the type of loyalty units earned such as miles, status credits, etc.; (2) who earned them, e.g., member characteristics such as in platinum tier, US citizen, etc.; and, (3) how they earned them, e.g., activity details such as flight taken from London to New York in business class, with Vision Airlines.
Conventional programs do not provide a seamless handshake between the member accruals and the billing to partners. Airlines total their partner account receivables manually, and those are often based solely on member accruals. What is needed is a partner account debit process for the systematic calculation of partner receivables based on member accruals and various member, partner and transaction attributes leveraging configurable loyalty rules framework.